NBC pays $1.25 billion to get two Olympics

THE BALTIMORE SUN

In a breathtaking and potentially perilous financial move, NBC yesterday announced that it had obtained the American broadcast rights to the 2000 Summer Olympic Games in Sydney, Australia, and the 2002 Winter Olympics in Salt Lake City.

NBC snagged the package for $1.25 billion, with $705 million going for the Sydney Games, and $545 million for Salt Lake City, along with $10 million in in-kind payments to each city's organizing committee.

In addition, NBC agreed to funnel large chunks of its coverage to its CNBC and America's Talking cable channels to handle bonus Olympics telecasts as well as to produce and distribute a weekly 30-minute, Olympic-related show that will run from the week after the closing ceremonies in Atlanta next summer until the week after the end of the Salt Lake City Games.

The payout is a 57 percent increase over the $456 million NBC paid for the rights to next summer's Olympics in Atlanta and a 45 percent boost over the $375 million CBS laid out for the 1998 Winter Games in Nagano, Japan, and will land each of the organizing committees in excess of $100 million more in rights fees than they had budgeted.

But network officials believe that NBC's advertising staff can sell enough time to make the deal viable, if not profitable, by offering the two Games as a package.

"We have the confidence to undertake what is an extraordinary financial obligation, and we have the confidence in our advertising staff to market what should be extraordinary programming," said Robert C. Wright, NBC's president. "It will be the signature of the network for many years to come."

Said Phil Stoltz, vice president and general manager of WBAL-TV, NBC's Baltimore affiliate: "The opportunities for promotions and sales . . . are unparalleled, especially now that the [2002] Games are in the United States. You can't ask for anything better. We are thrilled."

The timing of the move -- coming one week after the Walt Disney Co. purchased Capital Cities/ABC for $19 billion and Westinghouse bought CBS for $5 billion -- caught the industry by surprise, because negotiations for the Sydney Games weren't to begin until next month, and bidding for Salt Lake City wasn't scheduled for another 18 months.

But NBC, which has announced that it has collected $600 million in ad revenue for the Atlanta Games, snatched the packages away from the other three major networks, who all were expected to bid on either or both Olympics, with a pre-emptive offer and with a confidentiality clause designed to keep ABC, Fox and CBS out of the process.

Indeed, many industry observers had expected Fox, whose chairman, Rupert Murdoch, is an Australian native, to be active in the bidding for Sydney. CBS, which has aired the Winter Games in 1992 and 1994, also was said to have interest. ABC, with an infusion of cash and enthusiasm from Disney, whose chairman, Michael Eisner, has talked about linking sports and entertainment, also was thought to be eager to enter the bidding.

NBC, however, trumped them all with a deal that moved quickly.

Within 48 hours of getting the go-ahead last Wednesday from Wright and Jack Welch, the chairman of General Electric, NBC's parent company, a network delegation headed by Dick Ebersol, president of NBC Sports, gave Dick Pound, the International Olympic Committee's chief television rights negotiator, a mammoth bid for the two Games.

NBC's condition was that the IOC either accept or reject the bid by Sunday, with the understanding that if the bid were rejected, the network would enter the bidding process, but not at the price it was offering for exclusivity.

"We had thought that we would have a traditional bidding process. We had not anticipated a pre-emptive offer of this magnitude and scope. We've done something that was quite special," said Pound. "Their [the other networks'] reaction was disappointment . . . and reluctant admiration over the initiative that NBC took in stepping out on a limb."

The purchase carries a tremendous risk for NBC, which, by 2002, will have televised five of nine available Olympics over a 14-year span.

The network suffered big losses in 1992 with its decision to splinter chunks of coverage of the Barcelona games off onto an ill-fated, pay-per-view experiment called the "TripleCast."

But John Mansell, an analyst for Paul Kagen Associates, a media analysis firm, said NBC's move was as much to raise the profile of the two cable channels, which likely will carry more than 100 hours each of coverage from both games, as for the broadcast network.

One advantage the Sydney Olympics will have over the usual Summer Games is that they will take place in mid-September, rather than in mid-July, meaning the numbers of viewers will be higher. And the Games fall during the start of the fall television season, so viewers should expect to see scads of promos for new NBC shows.

The Salt Lake City competition, which comes during February, a sweeps month, should generate nice revenues, although NBC probably shouldn't expect to see ratings of the magnitude that CBS got for last winter's Games in Lillehammer, Norway, when the Tonya Harding-Nancy Kerrigan ice skating flap sent the Nielsen numbers into the stratosphere, surpassing even the Super Bowl.

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